Tax What If Doctor

Most business owners in any five year period can answer yes to at least one of these life event questions that would cause them to need to know what their company is worth. 1. Are you contemplating the sale of your business? 2. Are you working with or bringing in a partner? 3. Are you contemplating or currently going through divorce proceedings? 4. Are you potentially going to have to defend yourself or your company in court? 5. Are you looking for financing? There are other possible reasons of course, but the point is that there are many times a business owner finds himself or herself needing to obtain a proper business valuation for their company. Unfortunately, it’s often an[…]

People who earn more than a certain amount and who are enrolled in Medicare Part B or Medicare Part D, or both, will face additional premiums, called The Medicare Income-Related Monthly Adjusted Amount (IRMAA). IRMAA “surcharges,” which is a replacement word for a tax, are based on income earned two years prior to the coverage year. So, for example, a client enrolling in Medicare in 2024 would pay an IRMAA surcharge based on their 2022 tax return. Generally there are two types of people that pay IRMAA surcharges: Those who might be affected and those who will always be affected. Because it is income based, people with an unusual income event may only be affected once, while people with higher incomes may always[…]

With signs of fall in the air, it’s time to start thinking about things that need to be done to prepare for winter. The garden harvests are rolling in, fresh vegetables are everywhere and it’s really, really great. Time to fill up your oil tanks before the price change, and at least know where those snow tires are in the back of the garage. It’s also time for tax planning. There are so many things in the tax code that have time limitations. It’s really time to check in with yourself if you want to actually participate in your bill with the IRS. Taxes can be very much within people’s control, even though they don’t feel that way. If you’re[…]

All around the country, there are people in an absolute panic because the real tax deadline for personal tax return extension filers is approaching and they are running out of time. The exception would be for those who have been affected by flooding or other natural disasters and may be given an extended deadline by the IRS. Those people may now have additional time to file, but would need to check the IRS website to see if they are in an affected area recognized by the IRS and would be covered by the exception. For the rest of us extension filers, there are some choices that need to be made quickly. The deadline is just a few weeks away. You’re not ready. What do you do?  The[…]

This last wave of tax filers are quite often the most productive people in our economy. Many are business owners, some with more than one business, or at least in some ways just have a lot going on, which means they usually add and not subtract from the tax base. That said, if your taxes are not done yet, then you’re in a rush (or should be) to get everything ready for filing, which usually means you’re not getting everything done accurately, and very often means you’re not getting any real tax mitigation advice either. It’s a vicious cycle. You wait to file because you are so busy getting ahead and just plain getting things done, then comes the fear[…]

This is the time of year when people often start taking personal inventory of how fortunate they are and start considering charitable contributions as a way to “give back” a little. For some, it’s an automatic budget item in their day to day lives, but for others it’s a new activity. For many years the IRS has helped people give by allowing charitable contributions to be deducted on schedule A when they file their taxes. The tax deduction value of those gifts changed with the Trump tax code simplification, as many people no longer need to file a Schedule A due to the higher standard deduction. Many people are still ingrained in their old charitable giving habits and aren’t aware[…]

Ask anyone if they “pay too much income tax” and the knee jerk reaction is almost always, “Yes!” and without much hesitation. Why do we call that a knee jerk reaction? Because if you then follow the question up with two more questions, “What did you pay in federal tax last year? And/or what bracket are you in?” they almost as quickly say, “I don’t remember, or I’m not sure.” Or they might guess at a bracket percentage, but usually not correctly. We’ve even had people profess the pain of paying too much in tax only to discover that not only did they get back all of their withholdings, but they were given tax credit refunds of money they did[…]

It may sound odd when you say it out loud, but after considering all the facts, it’s quite true. It’s an emotional but understandable reaction to think you always want to lower your tax bill as much as possible. However, except in the case of death, the tax code is basically a case of “tax me now or tax me later.” In many cases, to lower your current tax bill means that income avoided or deductions taken now are going to come back into your life at some later point. One example would be an IRA. You put money in an IRA and lower today’s tax bill, but those dollars will need to be taxed at some point. When you[…]

In the “old days,” you went to the general store for your dry goods, the blacksmith for your horseshoes or tool repair and likely had your own cow and chickens for milk and eggs.  Fast forward, you went to a lawyer to get a will, an insurance rep to get a policy and an accountant to get your taxes done.  There was no internet, so information was something you had to gather and organize yourself.  You would talk to a few co-workers, a family member, a mentor and then take actions based on the limited intel.  Back then, you would sit with a financial advisor, and if they were a big deal they might have a stock ticker pumping out tape[…]

First, let us make it clear that we aren’t saying that your CPA or accountant is doing anything wrong. The accounting industry is one of the most honorable and respected fields around. That being said, there is a misconception that they are going to be proactive when advising clients about their taxes, and that’s just not part of the training most have received. Certainly some are, but the majority who know things about steps a business could take to perhaps be more aggressive on tax planning for the future, don’t feel it’s their responsibility to pursue a client in engaging in alternative accounting choices or behaviors. A good example is “Bob” who owns a tire shop that has grown from two employees[…]

Most people pay little attention to their tax obligations, which we understand, as we are the richest and most privileged society ever to exist and so are very comfortable and complacent. However, taxes are a matter of political policy and as the economy changes so do tax policies. It would be helpful for everyone to at least take a moment and reflect on why the US separated from England, as when the Pilgrams came here they were heavily taxed in England and they risked life and limb as well as gave up creature comforts because they would then have NO TAXES. Nobody would have their hand out and “take away their money by force” which, framed in a different way,[…]

Well, do they or don’t they, actually? Long debated and often manipulated by the media, the topic of the wealthy and taxation has many, many complex points and counterpoints. First, when people say that, they often don’t define what kind of tax. The people hearing the comment usually go to federal personal income tax in their mind as TAXES. However, if a wealthy person owns 20 C corporations, with each filing their own tax returns, those C corporations pay their own taxes and unless the wealthy person needed to take a dividend or other distribution, then they could pay zero federal income tax, even though their companies paid potentially millions in taxes themselves.   The kinds of taxes people pay depends[…]

Have you ever seen a cat on the side of the road that waits until the very last second and then darts across the road in front of traffic? Ever see one that didn’t make it and think, “Some child is going to be very sad soon.”? I always wonder what makes the cat wait until the last second, but then again that’s what most taxpayers seem to do. They wait until February or March with a filing deadline looming and then dash out in front of a tax preparer and beg, “Is there anything we can do to lower this?”  Like the cat, perhaps the preparer has an idea and they miss getting hit with the entire bill, but[…]

It’s July. In a few short months people will be filing their 2024 tax returns with that familiar recurring moan and groan about paying too much. Now is the time to take your preventative medicine and avoid the pain next time around! Being human, we all form habits. Some good. Most bad. We try to develop good ones to replace the bad ones and often we are successful, but most successes don’t come without a coach, cheerleader or some kind of support. Tax time is usually a time of regret over not being successful at last year’s promise to oneself, “I’m not going to pay this much again. I`m going to keep better records and search out a tax planner or some professional[…]

If you pay attention and plan your tax outcomes proactively, there are many things you can do to reduce your tax bill. But the planning and the resulting activities that you need to engage in to achieve those outcomes are all year-round actions you must take, not just things to do the week before you file. Start by opening your calendar and marking a day each month to spend an hour on your taxes. That’s 12 hours a year. If when you file your taxes those year-round activities saved you $1500, then you were “paid” $125.00 an hour, which is worthwhile! If you saved $10,000.00 in taxes, that would be $833 per hour. Sign me up for that job! Start[…]

Many people who do not deal in the tax preparation or planning business think of taxes as something to deal with one day per year. Like Christmas, only not as good. So perhaps more like “Grinch Day.” Nevertheless, it doesn’t get a lot of attention after April. It drifts into the “Thank goodness that’s over!” mental space and goes away until the new year. It’s different for self-employed small business owners, as tax related issues are dealt with more often, but it’s still mechanical in nature. “I’ve got to go deposit payroll taxes today” or “I need to send in my 941 quarterly payment this week.” But still, their thoughts are not focused on proactive activities, but more so on responsibilities on[…]

When planning ahead, or just engaging in their day to day operations, most business owners at least occasionally think about tax deductions. A business dinner that can be partially deductible, or a new machine that can be depreciated. However, they often don’t think about or plan how to acquire other tax credits, which can often be much more valuable. Tax credits are often transitory, with the benefits increased or reduced from year to year, or sometimes eliminated altogether, only to be brought back again several years later. Over the last few decades we have seen some popular credits renewed or in some cases even made a permanent part of the tax code. Small business owners seem to often not be[…]

It’s hard to be logical all the time about everything. The most financially successful tax clients we serve at least attempt to force themselves to be logical, for their own benefit. For instance, our parents, as well as a subset of the economy including some popular radio show based advisors like Dave Ramsey, say you should pay off your home and have a “free and clear” deed as a goal (they are wrong in most cases by the way). That kind of thinking is emotional thinking, mixed perhaps with some presumptive attitude about what the general populous is capable of. “Well, we know we can’t get people to do what would really be best for them based on pure math and[…]

Many times business owners have come into our office and with our help have found that they were doing things incorrectly regarding their bookkeeping and taxes. Occasionally, the errors add to the tax burdens that they have been under-reporting. That never feels good, but it is always better to fix those issues prior to any audit. Often, errors discovered “pre-audit” can be fixed by simply amending the return, and no IRS issues follow, and everyone just moves on. But quite often, the errors made were not in their own favor. In those case, we help them file amended returns that net them large additional refunds for up to three years back, and that always feels great! So, how do these[…]

When people are contemplating selling an asset like a house, an investment property, stock or a business asset, it’s usually to make a profit or to raise cash. Sometimes, a house is sold in order to buy bigger (or smaller), to move to a different town to take a new job. In the case of stocks, it might be for the taking of profits, stopping further loses, or again to raise cash.  One common thread among all of these decisions is that people generally think about them for some time before they act, as usually these are among the largest assets they have. What we see often in the tax planning world is that people sell the asset, and then[…]

Tax Planning is a constant stream of adaptation to the new rules that the government and IRS come up with annually. One year we have a tax credit for new windows, the next year it goes away, but a new credit for heat pumps is added. The only constant is change. Occasionally, policies that are popular are extended and made permanent when the IRS has enough time and data that they can see that the tax break is having the expected effect in their budget for other government agendas. The new LIQCD (Legacy IRA Qualified Charitable Contribution) is one of those items that was added during the Secure 2.0 tax package in late 2022 that has yet to become mainstream,[…]

Tax policy and rates have always been fluid, much more so than most people realize, as they only focus on it for short periods one time a year. You also don’t see many high school or college classes on the history of taxes and tax planning, unless you’re in accounting school. Like a distant relative you see at an occasional wedding, you forget most of the prior experiences and conversations and simply repeat them as an act of convenience. It’s the lack of personal taxation understanding and the continuous ebbs and flows that allow the tax authorities to keep things the same just long enough to let people form habits, then change the tax rules to penalize the habits created.[…]

There is nothing permanent except change!  Stated by a Greek philosopher over 2500 years ago and it still stands true, especially in the tax code. Sometimes there are big changes, like the one coming in 2025/2026 with the expiration of TCJA, and sometimes small changes, but it’s a good bet that every year something for business owners that was deductible is not and something that was not deductible now is. It is an accountant’s job of course to keep track of all that, but the proactive communication between the accountants of the world and their clients is often lacking. A good example of this is entertainment. For a very long time entertainment was deductible for business owners while prospecting with[…]

Current tax rules now require that the entire balance of a non-spousal participant’s inherited IRA account to be distributed or withdrawn within 10 years of the death of the original owner. The 10-year rule applies regardless of whether the participant dies before, on, or after the RMD (required minimum distribution) age at which they had to begin withdrawals. In other words, you must withdraw the inherited funds within 10 years and pay income taxes on the distributed amounts. Since the withdrawals are required, you won’t pay the 10% penalty if you’re under the age of 59½. But you must pay income taxes on the distributions, and you must eventually empty the account. Children of IRA holders, same sex partners in some[…]

It’s human nature, of course. We complain about our weight while in the line at the ice-cream stand. We complain about being tired, then stay up late playing the latest game on our smart devices. Humans are funny and contradictory animals. Have you ever noticed that when you’re in a conversation, people are quick to complain about their taxes? Many people who complain about their tax bill are actually paying very little compared to most folks. However, some people pay a lot of unintended or surprise taxes. An example we see a great deal are self-employed folks. They will tell us “I pay too much in federal or state income taxes,” but on review of their 1040, they actually paid no[…]

Have you ever had a “light bulb” moment?  I have been driving for many years. I’ve driven at least a million miles and I own a few cars (I collect certain types), and when driving my spouse’s car or one from the collection that I haven’t driven in a while, inevitably it’s time to gas up. I pull up to a pump and get out and realize that the gas cap is on the other side, back up the car, turn it around with a sigh and fill it up. Then this year the “light bulb” moment. While trying to figure out the dashboard “iPhone” charger fuse location, I happened to be looking at the diagram of the fuel gauge in the manual from[…]

Some people have filed their tax return, received a refund and already spent it. Others have filed and paid and the “pain is over” for another year. But for many who have not filed and are looking at the calendar and saying “Oh, no!”, here are some tips. If you haven’t filed because of a natural disaster in your area, you may not have to do anything. The IRS gives a state by state accounting of any special things going on around the country that might affect filing deadlines. Click this link, go to your state and see: https://www.irs.gov/newsroom/around-the-nation.   If you don’t have anything under special rules then you may extend the filing of your paperwork by submitting form[…]

Don’t let your stockbroker off the hook when it comes to tax planning. Many people work with brokers when they buy and sell stocks. Many people now, because of the internet, also have become their own stockbrokers, doing their own research and trading on various platforms. Whether you use a professional or do your trades yourself, you still need to hold your stockbroker accountable. What do I mean? If a broker is helping you buy and sell, they had to take a Series license of some kind. Sometimes, an RIA (Registered Investment Advisor) has taken a Series 65 exam. If it’s a representative of a broker/dealer, perhaps they’ve taken a Series 6 or a Series 7 exam. There are other possibilities, but the point is, these exams are[…]

With tax season in full swing and documents from broker/dealers and other investment companies coming out later and later, you can definitely smell the tax “angst” in the air. The amount of pressure that tax offices and their clients seem to be under is palpable. Why is this all happening and what about this is important to you? It’s happening because, over the years, although the IRS has stood firm at mid-January to April 15th as the filing season for 1040 filers, on the other side of the equation are the vendors themselves that have to send documents to the IRS: The banks, the mortgage companies, the investment companies, etc. The companies have managed to lobby and get extensions of time to[…]

The answer to that might surprise you. Because, for the most part, the answer is yes.  However, sometimes they are only fair if you know how to “play the game”. Most people think only the wealthy can avoid paying income tax because they know how to play the game. Well, at a much lower level, everybody knows some of the tricks to “playing the game”. For instance, you might be contributing to your 401(k) at work. Well, you’re playing the game. However, you might not know that even though you’re contributing everything you can to your 401(k) at work, you’re still allowed to open an additional private IRA, and take another several thousand dollars off of your taxable income. The trick is “knowing the rest of the rules[…]